MoU with UK firm on rail project not binding

The Federal Government has provided clarifications regarding the recent Memorandum of Understanding between the Ministry of Transportation and MPH Rail Development Limited, a construction firm from the United Kingdom.

According to the government, the agreement is not considered binding.

This follows recent reports stating that the FG entered into a Memorandum of Understanding with an “unknown” company.

The Cable had, in a report, quoted some social media users as criticising the ministry for signing an MoU with a company that was recently established, as a report unearthed documents showing the company was established on September 26, 2019.

Some described the situation as another “P&ID saga in the making,” referencing the high-profile contract dispute between Nigeria and P&ID, a British Virgin Islands-registered company.

According Online reports that the Ministry of Transport signed an MoU with Messrs MPH Rail Development Limited, a company based in the United Kingdom.

This partnership aims to implement the Port Harcourt–Enugu–Calabar–Abuja Standard Gauge Rail Line project, following a public-private partnership framework.

The UK company will oversee the Port Harcourt–Enugu–Calabar–Abuja Standard Gauge Rail Line’s design, construction, commissioning, operation, and final transfer under the terms of the MoU.

According to the ministry, the Infrastructure, Concession, and Regulatory Commission’s issuing of a compliance certificate and the Outline Business Case’s clearance came before the MoU was signed.

However, the ministry, on Sunday, provided clarifications in a statement signed by the ministry’s Director of Press and Public Relations, Olujimi Oyetomi.

Oyetomi said the ministry’s attention was drawn to social media commentaries concerning the status and implications of the MOU.

“For clarity, a Memorandum of Understanding, or MOU, is a non-binding agreement that states each party’s intentions to take action, conduct a business transaction, or form a new partnership,” the statement read in part.

Oyetomi added that it is not a legally binding agreement.

He stated that it provides only a platform for further engagement, discussion, scrutiny, and the provision of required guarantees by the parties to reach an agreement if the parties are satisfied.

He further explained, “The MoU in question arose from an unsolicited proposal presented by the British African Business Alliance (BABA), an association based in the United Kingdom with interest in business in Africa.

“Its proposal was initially submitted to the ministry on 27th August 2019. As required, the proposal (Outline Business Case) was submitted to the Infrastructure Concession and Regulatory Commission (ICRC) on 8th December 2023.

“The major attraction of the proposal is BABA/MPH’s initiative to achieve 100% private sector funding for the project ‘with no loans or debt to the Nigerian government or any of its agencies’, as captured in Article 3.3 of the MoU.

“The Regulatory Commission on 27th December, 2023 granted approval and issued a conditional OBC Certification.

“It is pertinent to note at this juncture that COVID-19 was a major contributor to the time lag between initial proposal and the ICRC OBC Certification.”

In describing the company, Oyetomi said, “Messrs. MPH Rail Development (UK) is the company incorporated by BABA as the Special Purpose Vehicle (SPV) to ‘deliver’ the project.

“It must be emphasised that a company to be used for such a purpose is usually new with nominal shareholding to allow for stake holding by parties to the project at the investment stage.”

The ministry noted that MPH is required to provide several documents within 90 days of signing the MoU.

These include evidence of commitment from potential financiers, an environmental and social impact assessment report, a financial model and programme of action, a full business case study report, and a comprehensive feasibility study report.

“It is the submission of the above-listed documents and the outcome of their evaluation that will determine the desirability or otherwise of the proposal,” the ministry said.

“ICRC as the regulator of PPP is fully and duly in charge of the oversight of this process.

“The MoU, therefore, constitutes only the beginning of a long process that will lead to the project after due diligence and scrutiny by the ministry and other appropriate authorities.

“The nascent and nominal share value of the SPV company (Messrs. MPH Rail Development) does not diminish the plausibility of the business proposal at this early stage,” it added.

Therefore, the ministry assured Nigerians that it would diligently fulfil its legislative responsibility to provide the nation with an economical, sustainable, and efficient transportation infrastructure.